TIDMWKP
RNS Number : 1245N
Workspace Group PLC
28 January 2021
28 January 2021
Workspace GROUP PLC
Third Quarter business update FOR THE
PERIODING 31 december 2020
HIGHLIGHTS
-- Resilient customer demand through this ongoing period of
Government Covid-19 restrictions, with an average of 672 enquiries
per month in the quarter (Q3 2019/20: 1,001) and 109 lettings per
month (Q3 2019/20: 113)
-- Cash collection remains robust, with 91% of rent due for the
third quarter and 82% of rent due for the fourth quarter collected
to date, in line with the level of rents collected at the same
point in the third quarter
-- Like-for-like occupancy down by 3.4% in the quarter to 82.1%,
driven by the exit of customers that had given notice to leave
earlier in the year
-- Rent per sq. ft. reduced by 5.3% to GBP38.46, with
approximately half of the decline driven by short-term lease
incentives that will unwind over the next six months
-- Strong balance sheet, conservatively financed with a pro
forma LTV of 23% at 31 December 2020, significant headroom on all
facility covenants and GBP132m of cash and undrawn facilities
-- Pathway to net zero carbon published, including a commitment
to reducing operational and embodied carbon emissions in line with
our approved science-based targets to become a net zero carbon
business by 2030
Graham Clemett, Chief Executive Officer, Workspace Group PLC,
commented:
"The last nine months have certainly been challenging for
society, our customers and our business. Despite near-term
uncertainty, we are seeing signs that customers are starting to
look through the pandemic and we believe that our strategy,
business model and differentiated customer offer position us to
outperform over the medium and longer term.
In terms of trading performance in the quarter, customer
activity was impacted by Government restrictions, but we were
encouraged by the resilient demand for our space, which has
continued into the fourth quarter. It appears that we are now
coming towards the end of the significant occupancy declines we
have seen over the last three quarters.
Alongside managing the impact of the pandemic in the short-term,
driving forward our ESG agenda remains a priority for the Company.
A key element of that is our ambition to become a net zero carbon
business and we have today outlined how we aim to achieve this
target by 2030.
The timing and pace of our recovery will depend on the rollout
of the Covid-19 vaccines and lifting of Government restrictions. I
am confident that once we return to more normal market conditions,
our unique, character properties and truly flexible offer will be
attractive and relevant to an ever-wider range of businesses across
London."
Customer Activity
Having seen an increase in enquiries and lettings to near
pre-Covid levels in the second quarter, increasing Government
restrictions, combined with the usual quieter Christmas period, saw
a reduction in new customer activity in the third quarter. We have
continued to price competitively and, whilst overall enquiries and
viewings were lower in the quarter, the conversion to lettings was
strong, with the number of lettings in line with the same period in
the prior year, albeit with higher demand this year for
smaller-sized units.
Monthly Average Monthly Activity
------------------------------
Q3 Q3 30 Dec 30 Nov 2020 31 Oct
2020/21 2019/20 2020 2020
--------- ------- ------------ -------
Enquiries 672 1,001 555 677 785
Viewings 322 630 251 304 412
Lettings 109 113 110 94 122
--------- --------- ------- ------------ -------
Early signs in the fourth quarter are positive, despite the
renewed lockdown, with 622 enquiries and 241 viewings in the period
to 26 January 2021.
Customer utilisation of our centres has reduced from a peak of
33% of pre-Covid levels in September to around 15% in December.
While all of our office buildings remain open for business, as
expected, given the current restrictions, utilisation has dropped
further in January 2021 to around 10%.
Month ended
----------------------------------------
30 Dec 2020 30 Nov 2020 31 Oct 2020
------------ ------------ ------------
Average utilisation
(% of pre-Covid levels) 15% 17% 28%
Over the last nine months, we have worked with our customers to
retain as many as possible, including resizing or relocating them
where appropriate. Unfortunately for some customers this was not
possible and they gave notice to vacate, with the notice period
typically three to six months. During the third quarter, we saw an
exit from those customers who had given notice in earlier quarters.
The level of notices to vacate returned to a more normal level by
the end of the third quarter.
The net result has been a 3.4% fall in like-for-like occupancy
in the quarter to 82.1% and we also saw a reduction in rent per sq.
ft. of 5.3% in the quarter (rent roll is reported on a cash basis).
While we are competitively pricing our offer to capture demand,
around half of the reduction in pricing in the quarter was from
short-term incentives for both new and existing customers, granted
on a case by case basis, that will unwind over the next six
months.
Quarter Ended
----------------------------------
31 Dec 20 30 Sep 20 30 Jun 20
---------- ---------- ----------
Like-for-like occupancy 82.1% 85.5% 90.1%
Like-for-like occupancy
change* (3.4)% (4.6)% (3.2)%
Like-for-like rent per GBP38.46 GBP40.61 GBP41.16
sq. ft.
Like-for-like rent per
sq. ft. change (5.3)% (1.3)% (2.0)%
Like-for-like rent roll GBP89.8m GBP98.8m GBP105.8m
Like-for-like rent roll
change (9.1)% (6.6)% (5.3)%
*Absolute change
The combined impact of the drop in like-for-like occupancy and
rent per sq. ft. in the quarter resulted in a 9.1% fall in
like-for-like rent roll, to GBP89.8m. Total rent roll, which
includes the letting up of recently completed projects, reduced by
8.7% in the third quarter to GBP107.9m.
Rent Collection
Cash collection remains robust, despite the continued Government
restrictions on rent collection measures. The majority of our
customers pay monthly and we have to date collected 91% of rent due
for the third quarter. Collections for the first and second
quarters, which were reduced by the one-off 50% rent discount given
to our customers in respect of the first quarter, have also
improved. In total for the three quarters to 31 December 2020, we
have collected 94% of rent due.
Q1 Q2 Q3
------------------------------------- ---- ---- ----
Rent collected as proportion
of rent receivable after discounts
and deferrals 97% 97% 91%
Rent collected as proportion
of gross rents 47% 90% 90%
To date, we have collected 82% of rents due for the fourth
quarter, in line with the level of rents collected at the same
point in the third quarter.
We continue to engage with customers on outstanding rents due,
with the majority of the outstanding amount covered by rent
deposits and the provision for doubtful debts.
Financing
Net debt decreased by GBP5m in the quarter to GBP566m, with cash
balances and undrawn facilities of GBP132m as at 31 December
2020.
We have significant headroom on all facility covenants and the
pro forma loan to value ratio at 31 December 2020, based on the 30
September 2020 property valuation, remained unchanged at 23%.
Pathway to net zero carbon
We have today set out our net zero carbon pathway, publishing
our commitment to becoming a net zero carbon business by 2030. We
recognise that the building and construction industry significantly
contributes to the global carbon footprint and we want to play our
part to transition to a green economy, first and foremost by
driving down our operational and embodied carbon emissions in line
with our approved science-based targets, aligned with the goal of
limiting global warning to 1.5degC. Our pathway to net zero carbon
includes the following targets:
-- Reduce absolute Scope 1 GHG emissions by 42% by 2030
-- Reduce Scope 3 GHG emissions from capital goods by 20% by 2030
-- Install solar PV systems for all new developments and major refurbishments where possible
-- Continue to source 100% renewable electricity
More detail can be found in the separate announcement made today
and full pathway to net zero carbon document published on our
website at www.workspace.co.uk/investors
Board appointments
As previously announced, two new Non-Executive Directors have
joined the Board. Rosie Shapland and Lesley-Ann Nash joined the
Board on 6 November 2020 and 1 January 2021 respectively, both
joining the Company's Audit, Nomination, Remuneration and Risk
Committees.
-S -
For further information, please contact:
Workspace Group PLC
Clare Marland, Head of Corporate Communications 07795 622392
Finsbury
James Bradley 07500 616161
Chris Ryall 07342 713748
Notes to Editors
About Workspace Group PLC:
Established in 1987, and listed on the London Stock Exchange
since 1993, Workspace owns and manages some 4 million sq. ft. of
business space in London. We are home to London's brightest
businesses, including fast growing and established brands across a
wide range of sectors. Workspace is geared towards helping
businesses perform at their very best. We provide inspiring,
flexible work spaces in dynamic London locations.
Workspace (WKP) is a FTSE 250 listed Real Estate Investment
Trust (REIT) and a member of the European Public Real Estate
Association (EPRA).
Workspace(R) is a registered trademark of Workspace Group Plc,
London, UK.
LEI: 2138003GUZRFIN3UT430
For more information on Workspace, please visit
www.workspace.co.uk
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END
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January 28, 2021 02:00 ET (07:00 GMT)
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